Former Army Corps official guilty in massive contract fraud case

May. 18, 2012 - 03:44PM
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Two men involved in a scheme that paid more than $30 million in bribes and kickback for federal contracts pled guilty to federal charges, federal investigators said Thursday.

Kerry Khan, a former program manager for the U.S. Army Corps of Engineers, pled guilty to charges of bribery and conspiracy to commit money laundering, according to the Justice Department. His son, Lee Khan, pled guilty to a charge of conspiracy to commit money laundering.

The Khans were among four men arrested in October after federal investigators uncovered a scheme that allegedly steered millions in government work to contractors and planned to steer a government contract potentially worth $780 million.

According to a grand jury indictment issued by the U.S. District Court for the District of Columbia, Kerry Khan and Army Corps of Engineers program director Michael Alexander had conspired since 2007 with an official at Virginia-based EyakTek, a subsidiary of Alaska Native-owned Eyak Corp., to funnel more than $45 million in payments to EyakTek subcontractor Nova Datacom.

About $20 million in fraudulent expenses were built into the invoices, and payments on those expenses went to Khan, Alexander, EyakTek contracts director Harold Babb, and Lee Khan, according to the indictment.

The indictment said the men devised a similar scheme for a future Army Corps IT contract worth up to $780 million by tailoring the statement of objectives and statement of work to favor Nova Datacom and by planting on the selection board certain Army Corps employees who would favor the subcontractor.

“This investigation demonstrates that there is no tolerance for criminal activity by federal employees who hold positions of trust in the federal contracting process,” Small Business Administration Inspector General Peggy Gustafson said in a news release. The SBA worked with the U.S. Attorney’s Office and Federal Bureau of Investigation on the case.

Kerry Khan’s bribery charge carries a statutory maximum of 15 years in prison and the conspiracy charge carries up to 20 years of incarceration, according to the Justice Department.

The charges also carry potential fines, an order of restitution, and the forfeiture of $11,082,687 in cash and property, including more than $1.4 million in bank account funds, 13 properties in Virginia, Florida, and West Virginia, and a 2011 GMC Yukon Denali truck, the Justice Department said in a news release. Kerry Khan has previously forfeited about $600,000 in bank account funds and four luxury automobiles.

As part of his plea agreement, Lee Khan agreed to forfeit his interest in more than $1 million in bank account funds, 13 properties in Virginia, Florida, and West Virginia, and a Rolex watch, according to the Justice Department.

Alexander and Babb pled guilty to charges in the case earlier this year. Nova Datacom’s former executive vice president Theodoros Hallas pled guilty in October to conspiracy to commit wire fraud.

The government has already seized or recovered approximately $7.5 million in bank account funds, cash, and repayments, 19 real properties, six luxury cars, and multiple pieces of fine jewelry, according to the Justice Department.